Why Brexit can’t transform Commonwealth trade

20 April 2018

by Andrew Dilley

With the Commonwealth Games in Australia’s Gold Coast, public attention has turned to the oft-neglected Commonwealth of Nations. The 2018 games dovetail with the Commonwealth Heads of Government Meeting (CHOGM) in London on April 16-20, the first since the UK voted to leave the EU. Tales of sporting prowess have competed with speculation about the possibilities the Commonwealth may provide for a post-Brexit Britain.

But a closer look suggests that Brexit cannot create a new economic role for the Commonwealth.

The Commonwealth today comprises 53 countries accounting for about 15% of world trade and about 30% of the world’s population. But other than the Queen’s symbolic role as head, what makes the Commonwealth more than a statistical and geographical agglomeration?

It is not simply a successor to empire, or a repository for imperial nostalgia. Its form reflects assertions of autonomy, equality and independence by successive generations of Canadian, Afrikaner, Irish, Indian, and African nationalists, and the UK’s equally jealous guardianship of its own sovereignty. As Liberal prime minister Herbert Asquith told the 1911 Imperial Conference, “we each of us are, and we each of us intend to remain, master in our own household”.

The Commonwealth today may be many things, but it is not a distinct economic entity

As the Commonwealth expanded from its original core – the UK and the settler dominions – to encompass the former dependent colonies after World War II, free “association” and voluntary cooperation characterised successive declarations about its nature.

The Commonwealth Secretariat, the Commonwealth’s principal formal institution, was established in 1965 as a result of pressure from newly independent leaders, particularly Kwame Nkrumah of Ghana, to separate the organisation more firmly from the interests of the UK government.

The contemporary Commonwealth lacks any mechanisms for enforcement beyond the sanction of exclusion for violation of broad basic principles of democracy and human rights. The entire evolution of the Commonwealth has been shaped by a concern to preserve national sovereignty.

The Commonwealth today may be many things, but it is not a distinct economic entity, which is why it has long been a hard sell to the private sector.

Claims that a new economic future lies ahead for the Commonwealth after Brexit often cite a “Commonwealth effect” – a propensity for Commonwealth countries to trade disproportionately with one another and with lower transaction costs. According to the 2018 Commonwealth Trade Review, this is explained by language, informal networks, and a shared legal heritage. But Brexit has little obvious impact on these historical and contingent factors. They existed before the vote, despite little conscious interest from businesses or much active cultivation by governments. And there is no reason to think that Brexit will enhance them.

The nature of Brexit makes it unlikely that the UK’s withdrawal from the EU can, in fact, turbocharge the economic role of the Commonwealth. At its core, Brexit is a reclamation of sovereignty by the UK, enabling potentially different policy choices. Yet that reclaimed sovereignty cannot then be deployed in a significant way at Commonwealth level. The association evolved to preserve, not pool, national sovereignty. It operates through voluntary cooperation between its members compatible with their other more binding international commitments – including Malta’s continued EU membership.

Short of an improbable wholesale overhaul of the Commonwealth itself, nothing is now possible at Commonwealth level that was not possible before Brexit, or with a “soft” Brexit.

the UK has no incentive or agreed intention to prioritise bilateral trade deals with Commonwealth

If it leaves the EU customs union, the UK will gain greater scope to pursue trade deals with individual Commonwealth countries. But as binding agreements between sovereign entities, these will be arranged bilaterally not at pan-Commonwealth level. It was ever so. The 1932 Ottawa Imperial Economic Conference, which established more comprehensive and protectionist imperial trading preferences, simultaneously negotiated a web of bilateral agreements in a month. Trade negotiations now take a lot longer.

The Commonwealth will play little to no role in UK trade negotiations with Canada or Australia, let alone India. Nor will negotiations necessarily run more smoothly or prove politically easier due to Commonwealth membership. For example, liberalising visa arrangements will be central to any accommodation with India, running counter to the importance of reducing migration for many Brexit voters.

In any case, the UK has no incentive or agreed intention to prioritise bilateral trade deals with Commonwealth members over other large economies including the US, China, Japan, Brazil, or the EU itself. While other Commonwealth countries may well negotiate with a post-EU UK, it is not clear why they might suddenly revise trade policies to privilege individual deals with Commonwealth over non-Commonwealth trading partners. After all, the broader structure of the global economy will have remained unaltered.

There is no underlying economic rationale, political will, or intergovernmental mechanism to produce a systematic reorientation of trade and investment within the Commonwealth. Whatever emerges from the London CHOGM, it will not herald either a transformed economic role for the Commonwealth or the foundation of a post-Brexit economic future for “global” Britain.

Also in Disclaimer

President Donald Trump late Sunday threatened Iran in a tweet, warning Iranian President Hassan Rouhani of “consequences the likes of which few throughout history have ever suffered before.” Just another week in Washington. Duisclaimer rounds up Trump's week.

Harry Leslie Smith thinks that Albert Speer had more integrity than Tony Blair. You donot have to be a Blairite or supporter of the Iraq War to see this as insane: the left promoting a Nazi. Diusclaimer looks at some of the worst of Twitter.